Net Investment Income Tax Calculator-Detailed

The law for taxing Net Investment Income was brought in as part of the Health Care and Education Reconciliation Act of 2010. NIIT was designed to fund Medicare expansion and is commonly associated with the Affordable Care Act (ACA) regulated by section 1411 of the Internal Revenue Code. We earlier published the easy NIIT calculator, but keeping in mind our visitors’ requirements, we designed this detailed NIIT calculator.

What is Net Investment Income Tax?

The net investment income tax, or NIIT, is imposed on individuals, estates, and trusts with certain investment income above a threshold.

The tax is computed at a rate of 3.8% and applies to a portion of net investment income when the taxpayer’s income exceeds certain threshold amounts based on filing status. (See the table below)

Net Investment Income Tax Calculator

What Type of Income is Subject to NIIT?

Net investment income encompasses various forms of income, such as interest, dividends, and annuities, which are not tax-exempt. For example , interest from municipal bonds is exempt from tax. So, such municipal bond interest is not counted for NIIT. Other types of income that are counted for NIIT are :

1. Capital Gains
2. Rental and Royalty Income after deductions for allowable expenses.
3. Passive Activity Income

What Types of Income Do Not Count for NIITT?

Here is the list of income that is exempt from being computed for the purpose of NIIT.

1. – Wages
2. – Unemployment payments
3. – Self-employment income
4. – Social Security benefits
5. – Distributions from some qualified retirement plans
6. – Alimony
7. – Tax-exempt interest
8. – Operating income from non-passive businesses
9. – Excluded capital gains earned from the sale of your primary residence
10. – Alaska Permanent Fund Dividends

Net Investment Income Threshold 2023 & 2024

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Exempt from Medicare? NIIT Still Applies!

It does not matter if an individual is exempt from Medicare taxes. He/she may still be subject to the Net Investment Income Tax if he/she has Net Investment Income along with MAGI in excess of thresholds( referred above).